Lebanese economy faces 9.2% GDP plunge in 2024 due to Israel's war: UN

Israel's aggression in Lebanon could further destabilise the country's economy, already devastated by years of crisis, the UN warned Wednesday, predicting a 9.2 percent drop in GDP in 2024 if the war continues.

After a year of border skirmishes, Israel launched a ground invasion in southern Lebanon which it said was to fight the Lebanese Hezbollah group.

"The scale of the military engagement, the geopolitical context, the humanitarian impact and the economic fallout in 2024 are expected to be much greater than in 2006," when the last Israel-Hezbollah war erupted, the UN Development Programme said in an initial evaluation of the economic impact on Lebanon.

"The escalating hostilities in Lebanon in 2024 strike while Lebanon is already weakened by years of political, economic, and social crises," it said.

Lebanon's GDP contracted by 28 percent between 2018 and 2021, and the Lebanese pound lost more than 98 percent of its value, sparking hyperinflation and a significant loss of purchasing power, the report said.

Despite all that, the situation seemed to have stabilised in 2022 and 2023, and the UN agency had predicted 3.6 percent growth in 2024, Kawthar Dara, an economist in the UNDP country office in Lebanon, said.

But if the war persists until the end of the year, "GDP is projected to decline by 9.2%", she added, citing two main reasons — companies unable to do business because of Israeli air strikes, and capital destruction, from factories to roads.

Grim outlook

The war, which has intensified since September 23, "threatens to further destabilise Lebanon's already fragile economy", and lead to a "prolonged economic downturn".

"Even if it ends in 2024, the consequences of the escalation of hostilities in Lebanon are expected to persist for years," the UNDP report said.

Without "substantial" international support, Lebanon's economic outlook is "grim", with GDP expected to contract by 2.28 percent in 2025 and another 2.43 percent in 2026.

And while in 2006, economic activity quickly resumed along with reconstruction, this time, "the dynamic is totally different", Dara said, expressing concern about the willingness of international donors to come to Lebanon's aid again.

The UN agency said in its report that with living conditions severely diminished, "it is imperative for the international community to mobilise immediate humanitarian relief support", along with development assistance for longer-term recovery.

An international donors conference on Lebanon is due to take place in Paris on Thursday.

The priority will be to fulfill the UN's appeal for $400 million in aid for Lebanese displaced by the war, French President Emmanuel Macron's office said.